Grain Journal - January/February 2009 - (Page 115) VeraSun Bankruptcy FOUR OPERATING; SEVEN TO BE AUCTIONED Prior to its Oct. 31 filing for Chapter 11 bankruptcy, VeraSun Energy Corp., Sioux Falls, SD (605-978-7000), was operating 16 ethanols plants in seven Midwestern states. As of late January, the company was operating four plants, 12 were idled, and the bankruptcy court had ordered the company to auction off seven of its plants in March. The four plants, all operating at full capacity, are: Aurora, SD; and Fort Dodge, Charles City, and Hartley, all in Iowa. Those four plants have a capacity of producing 450 million gallons per year of ethanol, according to VeraSun Media Director Mike Lockrem. The 12 idled plants are: Albert City, IA; Albion, NE; Bloomingburg, OH; Central City, NE; Dyersville, IA; Hawkinson, NE; Janesville, MN; Linden, IN; Marion, SD; Ord, NE; Welcome, MN; and Woodbury, MI. Construction at a plant in Reynolds, IN, was started in 2006, but was stopped shortly after groundbreaking. Those 12 plants, according to Lockrem, are on “hot idle” awaiting restart. Cause: Corn Price Spike VeraSun’s financial problems started last summer when the company, in an effort to protect itself against rising corn prices, locked in futures prices above $6.50 per bushel. When futures prices sank to $4 per bushel, the company faced increasing feedstock costs as ethanol prices fell. The company has since canceled some of those corn contracts or reduced the price paid to farmers and elevators under bankruptcy court approval. “The filing was precipitated by a series of events that led to a contraction in VeraSun’s liquidity, impairing its ability to operate its business and invest in production facilities,” said CEO Don Endres. VeraSun suffered a loss of $476.1 million in its fiscal 2008 third quarter. “It was from a dramatic spike in corn costs, reflecting in part costs attributable to our corn procurement and hedging arrangements, and historically unfavorable margins,” Endres noted. “Beginning in the third quarter, worsening capital market conditions and a tightening of trade credit resulted in severe constraints on the Company’s liquidity position,” Endres continued. “Faced with these constraints, we filed chapter 11 petitions to facilitate access to additional liquidity while we reorganize.” Myke Feinman, associate editor Response No. 1151 J/F GJ 115 http://www.centralstatesenterprises.com http://www.centralstatesenterprises.com
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